Products or Markets?

Many association do choose to drive their products and services based on the needs of their market (which are largely their members and others closely associated with them). This is fine and often works quite well.

I would like to make the point, however, that an association could choose to have a particular product or service (or set of products/services) as the driving force for their strategy, addressing any market that values them. Their customers and members would change over time as they find new markets for their core product. The CFA Institute is a good example of what this might look like in practice.

Driving your choice of markets by a particular set of products you produce is as valid a strategy as determining your products/services by the needs of a defined market. Each would lead to very different looking associations but that’s the whole point of strategy: picking a direction and putting it into action.

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5 thoughts on “Products or Markets?”

David, your post is thought provoking. An association could choose to have am existing pet product or service as the driving force for their existance, addressing whomever values the product or service.

I remain, however, unconvinced that this is a very good model in a highly changing and competitive world, with global technology, economics and demographic preferences unpredictable beyond a few years. There isn’t much demand these days, as far as I can tell, for cassette players or 8″ floppy drives.

Assuming that there might be an association that would want to raffle off its future existance on an existing product or service, would you think that would make it even more important to have energetic and effective market analysis/research capabilities and competitive intelligence processes?

Sounds a lot like the tail wagging the dog to me.

PS: I would evaluate the CFA Institute and their certification processes as a response to the global market desire for consistent financial knowledge and capabilities, which their educational and certification programs support–not the other way ’round. ‘Course I could be wrong.

In similar fashion, we are a global SDO and develop the codes, standards and conformity assessment for technology such as pressure vessels, piping, nuclear, vertical transporation and the like. You’ll see our stamp on your hot water heater and local nuclear reactor, for example.

These are very important products and services, bringing in substantial revenues. So they are important products. But they were created and are maintained by our commitment to global personal safety, property protection and growth of the engineering body of knowledge. We’ll change our products anytime, as needed, to keep pace with market needs and demands, for example fuel cells and nanotechnology. It’s called staying current.

1: Picking a product driven strategy does not mean you focus on a ‘pet’ product and throw all other critical thought out the window.

The main difference from being market driven is that you look for markets (through market analysis) that your products/services can provide value to and target them. In the sense of membership, you define your potential membership base by the total population of people/companies that can benefit from the value of your products or services.

2: No strategy is forever. All organizations that wish to remain healthy have to constantly assess how their current strategy is serving them and make changes when it is not doing well. Organizations could switch between market and product focus overtime based on the changes in their organization, industry, field and the world at large.

All that said, a product driven strategy very well may not be the best choice for your organization and many others. I’m not advocating for it over the others in general.

What I am advocating for is making strategy a conscious, rational and informed decision by assessing all the options and selecting the best one to get you where you want to go.

This is a fascinating discussion in light of 3 recent books I’ve read. First is Good to Great, where Jim Collins and his team found that of the great companies he studied, all of them were able to identify what he called their Hedgehog Concept, which he describes as the center of a Venn diagram with 3 circles: one representing what you’re best in the world at, one representing what makes you money, and one representing your main passion. This seems to resonate with what you’re saying, that an organization should identify it’s Hedgehog Concept and let the strategies and the products related to those strategies fall into line with the sweet spot of what the organization does best, is most passionate about and finds to be most effective in according to some agreed upon metric or set of metrics.

The second book I read was a monograph written to accompany Good to Great for leaders in associations and nonprofit organizations. It’s called Good to Great and the Social Sectors. The monograph is only about 35 pages, but it’s a fascinating extension of the ideas from Good to Great for association professionals. In both books, Collins provides a great word picture for the importance of identifying an organization’s Hedgehog Concept. He asks his readers to imagine a giant steel flywheel some 30 feet in diameter and several feet thick. The flywheel is an organization’s Hedgehog concept and the goal is simply to gain momentum.

I thought of this idea when I read your post, since I hear you saying to associations that it’s important that an organization consider the huge waste of energy when trying to either start too many flywheels at the same time, or change direction of a flywheel that’s already in motion. And what I heard Collins saying in his book was that the truly great organizations over the past 15 or 20 years have all chosen a single Hedgehog Concept and relentlessly shaped their strategies around that concept. In his monograph, Collins makes a convincing case that this is just as true in the social sectors as it is with for-profit organizations.

The third in a series of books I’ve read (actually skimmed in this case) is called The Strategy Paradox: Why Committing to Success Leads to Failure [And What to Do About It], by Michael Raynor. I felt that I identified the gist of Raynor’s book early on, so I just skimmed the rest of it. What I gathered was that because of the pace of change, sticking to a good strategy may actually be bad for your organization. This book resonates with Kevin’s post and Virgil’s comments to both Kevin’s post and yours. Raynor’s suggestion is basically to hedge your strategies so you have at least some momentum accrued in different areas.

In addition to the books I’ve been reading, I was able to sit a class on strategic marketing offered by CalTech and taught by Chris Halliwell (http://irc.caltech.edu/courses/Technology_Marketing_Courses.htm). The class was geared toward marketing for technology professionals, but the concepts apply to any organization and one of the things we went through was an overview of Voice of the Customer.

Two things come to mind related to this conversation. First, I think this really is a paradox as Raynor describes in his book, and one that is becoming more and more essential for organizations to address as the rate of change increases. On the one hand, strategies and their underlying Hedgehog Concept need to remain the same in order to get momentum behind the flywheel. And yet, on the other hand, the ground under each of these strategies is unstable and in constant movement. To use a sailing analogy, to see a storm brewing and continue the strategic course into that storm is no more beneficial to a chartered vessel than to float aimlessly at sea cast about in circles by constant changes in the wind.

The key to the paradox in my mind is the fact that the word product is overloaded. When some think of a product, they are talking about specific vehicles for generating revenue in some segment of some market. When others talk about a product, they’ve backed out to the 60,000 foot level where mission statements live and they’re talking about something much more abstract. Michael Gerber gives a great example of this in one of his books where he describes how Channel isn’t in the business of selling perfume. Channel is in the business of selling hope. Both are products, but in two very different senses. Perfume sells in a very specific market with segments and sub-segments; whereas hope is a product which finds a home in a variety of markets.

You could almost differentiate these two distinct products as Products with a capital P and products with a lowercase p. And certainly, classic market driven principles like Voice of the Customer seem to be important at both levels. In fact, it seems that for an organization to be most effective at their Hedgehog Concept, they’ll have to have a direct and unfiltered line to the voice of their customers or members.